In August, US prices for high deinking grades and pulp substitutes rose due to improved demand and tight supplies, driven by growth in the Away-from-Home tissue sector and increased mill consumption
Improved demand met “tight” supplies of high deinking grades and pulp substitutes this month, and prices increased in August for the second time this year. Growth in the Away-from-Home (AfH) tissue sector in the first half of this year helped to bring back buyers that hacked away at premiums and orders for secondary fiber as mills worked through their built-up stock of virgin pulp that last year saw significant price falls.
Mill contacts told Fastmarkets’ PPI Pulp & Paper Week that their high inventories of raw material stock shied them away from high deinking grades and pulp subs orders for the first half of 2024, yet for July and again in August, buyers sought additional tons. Some buyers increased premiums for August orders, too, contacts said.
“We were pretty out of the market in the previous months as our inventory was too high,” a mill contact in the East said.
Consumption up 3.1% - 4.8%
Both mill consumption and inventories of high deinking grades and pulp subs remain well above year-ago levels. Recent data from the American Forest & Paper Association (AF&PA) report that mill consumption of high deinking grades in the first half of 2024 increased 3.1% to 1.24 million tons vs 1.21 million tons in the first half of 2024. Mills consumed more pulp substitutes from January to June of this year, too, taking in 569,000 tons of pulp subs in the first half of 2024 vs 537,000 tons in the first half of 2023, a rise of 4.8%, or 32,000 tons.
The AF&PA’s quarterly report also showed that mill stock of raw materials is high – 12 days of supply for pulp subs, and 16 days of supply for high deinking grades, in the second quarter of 2024. Generation typically slows in summer months as office workers vacation and printers slow down production.
With the 2024 US election ahead, contacts questioned whether Pres. Joe Biden’s dropping out of the race, to be replaced with VP Kamala Harris, would require reprints or more printed publications that could add more generation to the recovered fiber supply in the coming months. However, contacts pointed out that this would most likely occur more so in “blue,” Democrat-led states rather than “red,” Republican-heavy voter states, as well as the focus more on digital advertisements over printed materials that could dent any potential supply pickups through early November.
Another mill buyer said reduced raw material stock was at play for the higher prices and added demand in August, as well as sluggish generation.
“People have pushed up premiums … driven by their inventories must be low, and generation has declined, there’s no doubt about that,” the mill buyer said.
Rising prices for pulp substitutes and HWEC
Suppliers worked through their stocked-up inventories of pulp substitutes and some high deinking grades, and returned demand for pulp subs bumped up prices by $5/ton for these grades in the Midwest, Southeast, and Southwest regions. Prices for hard white envelope cuttings (HWEC) increased to $280-290 in the Midwest, to $295-305 in the Southeast, and to $305-315/ton in the Southwest.
The strong demand for tons in the Southwest, partly driven by Mexico’s buying in addition to domestic mills, and met with softer generation during the seasonally slow summer, helped to add another $5/ton at the FOB seller’s dock to sorted office paper (SOP) and high deinking grades’ prices in this region, inching up SOP and coated book stock pricing to $130-140/ton in August.
“Demand for coated book picked up at some domestic consuming mills and in Mexico as well,” a supplier contact in the Southwest said. “Pricing held in July, but … pricing will increase in August as supply remains tight.”
SOP’s national US average, at $125/ton in August, is $8/ton below the $133/ton US SOP average in January 2024. Prices declined with demand this year. Recently improved demand and softer supply availability pushed up prices rarely seen so far this year as buyers have had the upper hand. Firm export demand also took more tons in recent months, contacts said.
AfH shipments ‘surprisingly strong’
As generation sees seasonality slowdowns, AfH demand hit the fast lane. In the AfH sector, “all main categories recorded positive volume growth, with the strongest relative growth in the small facial tissue category, followed by toweling and napkins,” according to Fastmarkets’ US Tissue Monthly report published on July 31. The report said AfH shipments in June were “surprisingly strong,” up 2.4%. While at-home retail shipments recorded 0.7% decline in the first half of the year, AfH shipments booked growth of 1.7% from January to June.
Source: SOP and pulp substitute prices rise slightly as AfH shipments increase by 1.7% in 1H - Fastmarkets